African Christian Democratic Party (ACDP) whip Steve Swart has said that it is time for hard and unpopular decisions to be implemented following the tabling of the mid-term budget.
Finance minister Tito Mboweni tabled the budget in parliament on Wednesday afternoon. Among other things, he warned that carrying on in the current mode would see the country’s debt to gross domestic product (GDP) ratio reach 70% by 2022/23.
The ACDP called on government to implement hard decisions to stimulate economic growth, which was needed to instil investor and business confidence, create jobs and ward off further investment downgrades, said Swart.
“The ACDP is deeply concerned about the high rate of unemployment, slowing economic growth, increased budget deficit forecasts, and spiralling public debt levels as disclosed in today’s Medium-Term Budget Policy Statement.
“Finance Minister Tito Mboweni clearly has very little or no fiscal room to move, given the low economic growth South Africa has experienced this year, down from a projected 1.5 % of GDP to 0.5 % of GDP.
“This, together with the shortfalls in tax collection, which is estimated to reach R53bn this year, and substantial bailouts to SOCs, has resulted in a far higher than projected budget deficit of 5.9% of GDP, as opposed to the 4.5% announced in February. This increases dramatically to 6.5% of GDP next year,” said Swart.
The fastest growing item on the budget was debt service costs, which were set to balloon over the medium term to R299.1bn by 2022/23 – previously estimated at R202bn for 2019/20).
The national debt exceeded R3 trillion this year and is expected to rise to R4.5 trillion over the next three years.
“A shift needs to take place from consumption spending (salaries etc.) to infrastructure spending,” said Swart.
“While the ACDP welcomes today’s announcements on stabilising public finances, and state-owned companies, the critical question is whether the minister will be able to implement the necessary plans. Cosatu and the SACP have already indicated their opposition to his economic recovery plan.
“Hard, and possibly unpopular decisions are necessary to stimulate economic growth, which is required to instil investor and business confidence, and create jobs. Yesterday’s announcement of an increased unemployment rate of 29% is alarming and is the highest in 11 years,” said Swart.
Eskom remained the most critical threat to the economy, he said.
The ballooning public sector wage bill was unsustainable and posed a serious risk to the expenditure ceiling and fiscal consolidation path. “This must be contained over the medium term, and we welcome the minister’s comments regarding “slowing growth in the compensation bill.”
However, the ACDP welcomed the reallocation of funds to deal with high crime levels as well as recover ill-gotten gains through corruption and state capture.
Additional funds should be allocated to the Asset Forfeiture Unit and Special Investigating Unit, said Swart.
Funding was also urgently required to provide assistance to farmers and residents in drought-stricken areas. It had been a challenge to find the additional funds, given that the contingency reserve for the present financial year had largely been spent, he said.
“South Africans, as well as foreign and domestic investors, have run out of patience with ongoing maladministration and state capture resulting in the looting of state finances, and demand drastic action. Anything less will be unacceptable and severely punished by ratings agencies, particularly Moody’s which is set to issue its review as to whether the country will be downgraded to junk status in two days’ time,” said Swart. – African News Agency (ANA)